Small cap stock falls up to 8.5% after promoters plans to sell a stake of 24.28%

Multinational packaging firm and leading PET film manufacturer Polyplex Corporation’s shares tanked 8.52 percent on Wednesday’s trades to reach an intraday low of ₹ 1389.90 apiece on the National Stock Exchange (NSE), after its profits nose-dived and its promoters agreed to sell more than a 24 percent stake in the company. 

At 12:39 PM, the company’s shares were trading at ₹ 1393.00 apiece, down 8.32 percent. 

Sale of stake by the promoter group 

The company informed the bourses that it has entered into a binding term sheet dated May 23, 2023, with certain members of the promoter group and AGP Holdco Limited. This sheet records the terms and conditions on which the Promoter Group Members have agreed to sell a 24.28 percent stake in Polyplex Corporation for an aggregate of ₹ 1379.47 crores. They have also agreed to certain put-and-call option arrangements. 

Accordingly. Each shareholder of the company who has a shareholding in excess of 22.5 percent and qualifies other prescribed criteria will have certain minority protection matters, such as an alteration to capital structure, change of statutory auditors, and divestment of a material undertaking/subsidiary among others. 

Moreover, they will have a right to appoint one director on the board of the company and such director will also be a member of identified Board committees. The investors will have the same rights in respect of director appointment on the Board of the identified subsidiaries of Polyplex. 

According to the shareholding pattern of the company, its promoters currently hold a 50.97 percent stake. 

Results 

Polyplex Corporation’s consolidated net profit for the January to March quarter (Q4FY23) crashed 93.34 percent to ₹ 20.27 crores, as compared to ₹ 304.44 crores in the corresponding quarter a year ago (Q4FY22). It reported an 11.08 percent decline in its revenue to 1731.22 crores in Q4FY23, as compared to ₹ 1,947.04 crores a year ago. 

For the entire year (FY23), the company’s net profit fell by 36.20 percent to ₹ 615.54 crores, as compared to ₹ 964.83 crores a year ago (FY22). However, its revenue increased to ₹ 7747.47 crores in FY23 as compared to ₹ 6,752.38 crores in FY22. 

For the financial year 2023-24 (FY24), the board has recommended a final dividend of ₹ 3 per share of the face value of Rs. 10/- each, subject to shareholder approval. 

With a market capitalization of ₹ 4,770 crores, Polyplex Corporation is a small-cap stock. It has a return on equity of 17.86 percent and a debt-to-equity ratio of 0.25. Its shares were

trading at a price-to-earnings ratio (P/E) of 9.06, which is significantly lower than the industry P/E of 16.52, indicating that it might be undervalued as compared to its peers. 

Written By Simran Bafna